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ORIGINATION
THE LATEST
back from FHA lending, possibly due
to the heightened risk of enforcement.
Kaul says that he believes these new
programs that don't rely on FHA are
creative attempts to increase lending
to LMI borrowers. He doesn't believe,
though, that they will become mean
-
ingful substitutes for FHA with the
way things are currently.
Kaul breaks his reasoning down
into two parts, the first being an acute
shortage of nonprofit capital to support
lending volumes nationally. He states
that, "Nonprofit capital is often sourced
via loans or grants from foundations,
community development organizations,
or the government. Limited funding
from these sources means the potential
mortgage origination volume through
such initiatives is also limited." The
second reason Kaul states is FHA's
huge price advantage over conventional
lending across the credit spectrum.
None of this means, though, that
these programs won't be beneficial.
Many first-time home borrowers and
LMI borrowers could benefit from these
programs, according to Kaul, due to the
recent cut in PMI premiums. That being
said, higher creditworthy borrowers are
most likely to benefit from it than those
with lower credit scores. Additionally,
low down payment lending outside of
FHA is still in its early stages meaning
improvements will be developed.
According to Kaul, "FHA's current
price advantage is simply a reminder
that such improvements will be needed
if we are to lend tight credit a sus
-
tained meaningful blow."
Many first-
time home
borrowers and
LMI borrowers
could benefit
from these
programs due to
the recent cut in
PMI premiums.
